MSc BIS – E-Business and Mobile Business 2023 Operational E-Procurement PDF

MSc BIS – E-Business and Mobile Business E-Procurement: Operational E-Procurement sw.vdma.org Prof. Dr. Uwe Leimstoll, Institute for Information Systems Learning Objectives: You … Understand the main functions of the operational e-procurement Know the key terms in operational e-procurement Know t...

MSc BIS – E-Business and Mobile Business E-Procurement: Operational E-Procurement sw.vdma.org Prof. Dr. Uwe Leimstoll, Institute for Information Systems Learning Objectives: You … Understand the main functions of the operational e-procurement Know the key terms in operational e-procurement Know the basic concepts of catalogue-based e-procurement and understand the differences in several aspects between them Can assess which concept is the suitable one for which kinds of goods Know the basic concepts of B2B integration and e-invoicing Recognise the challenges of B2B integration on different levels Institute for Information Systems – MSc BIS EMB – Operational E-Procurement 24.05.2023 2 Contents Introduction and localisation in the “e-procurement map” E-Purchasing Catalogue and content management B2B integration E-Invoicing Institute for Information Systems – MSc BIS EMB – Operational E-Procurement 24.05.2023 3 Introduction and Localisation of the Operational E-Procurement in the “E-Procurement Map” E-Procurement Concept Business View: Definition of Goals, Roles and Tasks of the Participants, Categorization of demand, Procurement Strategy, Motivation of Employees The E-Procurement Concept and Processes Organisational and Process View Application View and Technical View Sourcing (E-Sourcing) Contract Management Strategic Procurement Processes Input: Explicit Demand Operational Purchase-to-Pay Processes Purchasing of direct goods (Enterprise Resource Planning) Input: Optained Services Purchasing of indirect goods (E-Purchasing) Invoice Reconciliation (E-Invoicing) Output: Demand is covered and paid, internal Customer satisfied Source: According to Tanner (2009) E-Procurement Controlling Supplier Management Institute for Information Systems – MSc BIS EMB – Operational E-Procurement Spend Management Systems Operation of Business Software Supplier Integration Archiving (E-Archiving) Collaboration (E-Collaboration) Electronic Data Interchange Catalog Mgmt. and Content Management Support Functions E-Procurement Management 24.05.2023 21.05.2022 5 IT in Operational Procurement Benefits Challenges Contract enforcement (prevent Maverick Buying) Relationship and portfolio dynamics  Data management Standardisation of order processes Lower process costs and shorter lead times Availability of information Increased spend transparency Media disruptions Usability of applications Licence models of application providers Quality assurance Institute for Information Systems – MSc BIS EMB – Operational E-Procurement 24.05.2023 6 E-Purchasing Synonyms: Desktop Purchasing, Catalogue-based Purchasing, E-Ordering Order Types and Triggers Order Types – Single order – Framework agreement – Delivery plan – Collaborative scheduling Order triggers – Spontaneous need – Inventory running short – Scheduling run – Bill of material (BOM) from production – Customer delivery – Investment decision Institute for Information Systems – MSc BIS EMB – Operational E-Procurement 24.05.2023 8 The Challenge of Purchasing RL Anf. Stelle Besteller Einkauf RL Einkauf Bestellschreibung im SAP Kontrolle und Unterschrift Organisational units Lieferant WaEi Postbe. KKB Versand Post Re Prüf. KKB Postbe. NOK ZV Kred. BH Haupt. BH Archiv Sekr. Bedarfsermittlung Produkt auswählen BANF genehmigen BANF erstellen • 13 org. units • 27 steps for an order Bestellung frankieren, versenden Auftragsannahme Versand Material Quittieren Empf. Mat. Ablage LS Versand Rechnung zur ZA freigeben Kontrolle Kontrolle LS und Material Rg. sichten und erfassen Rg. etikettieren + kontieren Rg. registrieren + visieren Rg. Umlaufkontrolle LEGENDE VERBINDER externe Post int. Post KKB NOK Kurier int. Post ZV kein Mat.-/Doku-Fluss Institute for Information Systems – MSc BIS EMB – Operational E-Procurement sichten, weiterleiten Prüfung, Vorsortierung Rechnung verbuchen Barcode drucken + auf Rg. Rg. ordnen nach Buchungskreis Kontrolle durch zweiten MA Kontrolle durch Haupt BH 24.05.2023 Rg. scannen, archivieren Source: NOK, Patrick Schmid, 2002 Process steps Bestellung unterschreiben 9 Applications & Tools for E-Procurement (Repetition) Product class Characteristics Direct goods Production goods, trading goods Applications & tools Sourcing Heavily configurable goods Goods with rapidly changing prices/availability Services Service agreement Investment goods Infrastructure, appliances, buidlings Order transactions Invoicing ERP (Materials Mgmt.) Commodities Indirect goods Product data E-sourcing tools Institute for Information Systems – MSc BIS EMB – Operational E-Procurement Multi-vendor catalogue E-Purchasing System (EPS) Sell-side catalogue E-Purchasing System (EPS) with PunchOut Sell-side service catalogue Sell-side solution with PunchOut Specialized software modules ERP (Materials Mgmt) ERP (FICO/MM) ERP (FICO) 24.05.2023 10 Basic Concepts of Catalogue-based E-Procurement Applications Sell-side solution Buy-side solution Supplier 1 Supplier 1 Supplier 2 Supplier 2 Buyer Supplier n Buyer Supplier n Supplier 1 Supplier 2 Marketplace solution Market place Supplier n Institute for Information Systems – MSc BIS EMB – Operational E-Procurement Buyer 1 Buyer 2 Buyer n 24.05.2023 11 Sell-side Solutions: Branded Online Stores Institute for Information Systems – MSc BIS EMB – Operational E-Procurement 24.05.2023 12 Sell-side Solutions: Roles and Tasks Transactions Supplier User administration Buyer Reporting Distribution of tasks: User administration Communication Product Data Management Catalogue Management Order process support Communication Reporting Institute for Information Systems – MSc BIS EMB – Operational E-Procurement = Electronic catalogue = Business transactions 24.05.2023 13 Sell-side Solutions: Pros and Cons Strengths Weaknesses Low initial effort, no or low investments Multiple UIs (for buyers) Product-specific presentation of the goods Multiple logins (for buyers) Product configuration is possible Limited user administration Up-to-date information (products, prices, availability) Limited workflow support Additional documents Recommendations Limited spend overview Limited preselection of the product range Data on supplier‘s servers Multiple integration interfaces Institute for Information Systems – MSc BIS EMB – Operational E-Procurement 24.05.2023 14 Buy-side Solutions: E-Purchasing System with Multi-vendor Catalogue Institute for Information Systems – MSc BIS EMB – Operational E-Procurement 24.05.2023 15 Buy-side Solution: Roles and Tasks Supplier Transactions Content management for products Buyer Distribution of tasks: Product Data Management User administration Communication Catalogue Management = Electronic catalogue = Business transactions Institute for Information Systems – MSc BIS EMB – Operational E-Procurement Order process support Communication Reporting 24.05.2023 16 Architecture of Buy-side Solutions Tier Client Procuring organization ERP Client Supplier Browser Browser Converter / Connektor Integration Application Materials Management E-Sourcing E-Purchasing Catalogue Management Supplier Portal HR RFx Purchase requisition Data maintenance View data FI/CO Auction Approval Access control Enter data Contract Order Data publishing Reporting OCI calls Data Institute for Information Systems – MSc BIS EMB – Operational E-Procurement Multi-vendor Catalogue 24.05.2023 17 Catalogue-based Procurement at Schindler: Buy-side Solution with PunchOut Seller The SAP system supports the process logic. Transaction data are with Schindler. Two service providers support catalogue management and data exchange. Seller Seller Service provider SupplyOn Seller Seller Service provider jCatalog Schindler with SAP SRM + MM The e-purchasing system is part of SAP SRM. Electronic product catalogue Transfer of catalogue data Exchange of transaction data (orders, invoices etc.) Catalogue access via PunchOut Institute for Information Systems – MSc BIS EMB – Operational E-Procurement 24.05.2023 18 Catalogue Management for the Data of Indirect Goods at Schindler Employees can select the most part of the needed goods in an electronic multi-supplier catalogue. It reacts like an online shop. The operation of the multi-supplier catalogue is outsourced to a specialised IT service provider (jCatalog). – The suppliers (sellers) transmit their product data electronically to jCatalog. jCatalog is responsible for the whole catalogue management. – The e-purchasing solution SAP SRM has access to jCatalog using the PunchOut method. This enables the filling of the shopping baskets in SAP SRM. – Products of certain suppliers with volatile or very extensive product ranges or with configurable products are selected in a system of the supplier and then put into the shopping basket of the epurchasing solution of Schindler. Institute for Information Systems – MSc BIS EMB – Operational E-Procurement 24.05.2023 19 PunchOut Method This process is used mostly for configurable goods, product ranges with numerous variants, or products with frequently changing prices. Suppliers who support this process with their online catalogs must prepare them especially for that purpose. When the catalog is called, the customer-specific view, for example, in terms of the product range and the conditions, must be displayed, and a button for exiting the shopping basket and transferring the basket in a structured format must be provided.” Institute for Information Systems – MSc BIS EMB – Operational E-Procurement 24.05.2023 Source: Tanner (2012, p. 9) “PunchOut describes a method with which an external online product catalog can be called from a purchasing application. The contents of the shopping basket put together in this online catalog by the person placing the order are then returned to the purchasing application in a structured format. Communication takes place over the Internet using the http or https protocol. There are two standards for specifying the catalog call and confirming the shopping basket: cXML (Commerce XML) and OCI (Open Catalog Interface). 20 Buy-side Solution: Pros and Cons Strengths Weaknesses Single login Upfront investment Single UI Maintenance costs Maps procurement organization No product configuration Supports workflows No customer or product specific presentation Portfolio management No availability information Contract purchasing Low update frequency of prices, terms & conditions Spend transparency No special deals One interface for ERP integration Institute for Information Systems – MSc BIS EMB – Operational E-Procurement In italics: Weaknesses eliminated with a PunchOut solution 24.05.2023 21 Case Study Clariant: Electronic Purchase-to-Pay Process – Business View Suppliers of warehouse goods Product data provision Group Procurement Approval Services – GPS processes Product data Global sourcing and supplier integration Network connection Order processing Order: electronically, online, fax, or e-mail) Invoicing Suppliers of catalog goods Catalog/content management Provision of standards, processes, and IT tools Training Electronic invoice data Catalog data Interfaces/ format checking Invoicing Local sourcing and supplier integration Data transmission Catalog/content management Network connection Order processing Procurement/BU country Procurement/BU country 2 Procurement/BU country 1 Supplier integration Product data management Material planning Catalog call Shopping basket Order: electronically, online, fax, or e-mail) Electronic invoice data Institute for Information Systems – MSc BIS EMB – Operational E-Procurement E-shopping basket provision Electronic invoicing Purchase order Purchase requisition Purchase order release Purchase order Goods receipt E-invoice Invoice reconciliation 24.05.2023 22 Case Study Clariant: Electronic Purchase-to-Pay Process – Application View E-catalog suppliers Shopping basket in OCI format Client ERP system/ EDI converter ERP database PunchOut suppliers cXML files: Catalog data Purchase orders Invoice data (catalog data also possible in CIF) Client Catalog software EDI converter Product catalog cXML files: Shopping basket Purchase order Invoice data Wareh. goods suppliers* Ariba Collaboration Platform Register partner Provide catalogs Define scope of service Maintain product data Technically check data Create e-shopping basket Client SAP XI/ Netweaver SAP SRM Convert format Call catalog Approve purchase order cXML files: Purchase order, E-invoice Ariba Network Adapter SAP MM/FI Transmit/receive data Maintain wareh. goods data Transmit data Create/check e-invoice Manage warehouse goods Initiate purchase order Product catalogs Check goods receipt Client ERP system EDI converter cXML files: Purchase order Invoice data ERP database Institute for Information Systems – MSc BIS EMB – Operational E-Procurement Reconcile invoice *Product data In this case, provided directly to Clariant in an agreed form (e.g., Excel table) to be managed in the SAP system. Initiate payment SAP database 24.05.2023 23 E-Marketplace: Roles and Functions Supplier Service Provider Electronic = Catalogue = Transactions Service Provider Buyer Marketplace Product data management User administration Sell-side catalogue management Buy-side catalogue management Order process Order process Communication Communication Collaboration Collaboration Offering Sourcing Institute for Information Systems – MSc BIS EMB – Operational E-Procurement 24.05.2023 24 Catalogue and Content Management Catalogue and Content Management Catalogue management – Presentation of product data – Update and communication functionality – Mapping to standard catalogue formats: BMEcat, xCBL, cXML, CIF, … – Personalized publishing of data – Roles and access control Content management – Normalisation of data – Classification of products – Enriching product data, e.g. by images or additional documents Institute for Information Systems – MSc BIS EMB – Operational E-Procurement 24.05.2023 26 Goals Product data are – understandable – easily accessible – up-to-date – individualized (if applicable) Efficient data management “Content management is the oil in the gear of catalogue-based E-procurement!” (author unknown) Institute for Information Systems – MSc BIS EMB – Operational E-Procurement 24.05.2023 27 Possible Content Management Responsibilities Content management by the supplier – Publishing of content for buyers – Publishing of content on marketplaces – PunchOut integration Content management by a service provider Content management by the buyer Institute for Information Systems – MSc BIS EMB – Operational E-Procurement 24.05.2023 28 B2B Integration Definition of B2B Integration B2B integration is the combination of business processes across company boundaries and the involved IT systems with the aim of generating a common output (for the customer) in a distributed value chain. Institute for Information Systems – MSc BIS EMB – Operational E-Procurement 24.05.2023 31 Challenge: The Amount of Options Creates Complexity Different application systems – e.g. SAP, Sage, Microsoft Dynamics, Abacus, BusPro Different field names – e.g. invoice_nbr  rg_nr Different data formats – e.g. numbers with commas or periods, ISO units Different process identifier requirements – e.g. staff ID of buyer or approver Different channels – e.g. Value Added Networks (EDI), Internet Different document formats – e.g. Edifact invoice  cXML invoice Institute for Information Systems – MSc BIS EMB – Operational E-Procurement 24.05.2023 32 Order fulfilment Receive order No. 130 Book delivery for order 130 Create / send invoice 9000098 Framework agreement Strategic procurement Operational procurement Order Enter / send order 99000108 Dispatch advice Recieve order dispatch with Ref. Nr. 130 Invoice Receive invoice 9000098 SAP Business One Sales Buyer Invoice recipient Institute for Information Systems – MSc BIS EMB – Operational E-Procurement Pencil Company SO South, Mannheim Pencil Company Headquarter, Chicago Seller Invoice issuer SAP R/3 B2B Integration: Matching Data 24.05.2023 33 Seller Buyer Service Provider Institute for Information Systems – MSc BIS EMB – Operational E-Procurement 24.05.2023 Source: eTrade-Solutions, Swisscom IT Services, 2003 B2B Integration: Matching Formats 34 B2B Integration: Exchange of Documents Goals – Automatically exchange data between systems – Reduce manual interfaces and media discontinuities – Automate internal and external processes Requirements – Agreement on semantics – Mapping of formats – Security – Encryption – Authenticity – Integrity – Archiving Institute for Information Systems – MSc BIS EMB – Operational E-Procurement 24.05.2023 35 Interfacing with Business Partners One-to-one interface Supplier 2 Buyer Supplier 1 Supplier 2 Buyer Supplier n Intermediary (several different interfaces) Transaction platform Supplier n Institute for Information Systems – MSc BIS EMB – Operational E-Procurement Source: Schubert (2003, 13) Supplier Industry solution (several different interfaces) Supplier 1 Buyer 1 Buyer 2 Buyer n 24.05.2023 36 Digital B2B Networks as Integration Instruments (1/2) Many companies outsource the technical integration to specialized service providers so they do not have to master the complexity of e-commerce themselves. The specialists operate transaction platforms which realise the various integrations of the involved partners with universal integration tools. Source: Leimstoll et al. (2018, 89 ff.) At the centre of the services is the exchange of electronic business documents, supplemented by additional services like – Service and format conversions – Data mutations, classifications, etc. – Tracking and tracing functions – Online auctions – Digital signature (e.g. for electronic invoices) – Transaction protection (reaction in case of malfunction) Institute for Information Systems – MSc BIS EMB – Operational E-Procurement 24.05.2023 37 Digital B2B Networks as Integration Instruments (2/2) Most service providers focus on specific application fields, e.g. transactions in the supply chain. They often have an internal reference standard with which the requirements of the involved parties are matched. Source: Leimstoll et al. (2018, 89 ff.) Schindler works together with the service provider SupplyOn (see slide 18), Clariant with Ariba (slides 23 and 24). Institute for Information Systems – MSc BIS EMB – Operational E-Procurement 24.05.2023 38 Source: www.supplyon.com, accessed 28.11.2015 SupplyOn: Services Reducing Integration Complexity Institute for Information Systems – MSc BIS EMB – Operational E-Procurement 24.05.2023 39 E-Invoicing Yearly Invoice Volume (Switzerland) Invoice recipients 237 million to Companies send out 600 million 63 million to invoices per year 300 millions Institute for Information Systems – MSc BIS EMB – Operational E-Procurement Large and medium-sized companies (>10 employees) Source (numbers): PostFinance Billers Small companies (1-9 employees) behaving similar to households Households 24.05.2023 42 Invoices between Companies Billers 70 Mio send 90 mio invoices Medium companies (10-250 employees) send 128 Mio invoices Small companies (1-9 employees) send 82 Mio invoices 60 Mio 40 Mio Large companies Grossunternehmen employees) (>250 Mitarbeiter) receive 132 132 mio Mio invoices empfangen Re. Medium companies (10-250 employees) receive 105 mio invoices Small companies (1-9 employees) receive 63 mio invoices Institute for Information Systems – MSc BIS EMB – Operational E-Procurement • Companies exchange 300 million invoices • 132 million of them (44%) go to around 1’000 large companies • 98% of invoices to large companies come form large or mediumsized companies 24.05.2023 Source (numbers): PostFinance Large companies (>250 employees) Invoice recipients 43 Contract to Payment Process Biller Sales Invoice recipient Contract / offer / product information Order Order fulfillment Provision of service Invoicing of service Goods/services Invoice (data) Procurement Purchasing Incoming goods / service verification Invoice treatment Finance Payment (data) Finance Accounts Receivable Bank 1 Accounts Payable Archive Institute for Information Systems – MSc BIS EMB – Operational E-Procurement Bank 2 Archive 24.05.2023 44 Invoices and VAT Invoices are of highest fiscal importance to companies. VAT pre-tax deduction (Vorsteuerabzug) is only possible if all legal requirements are met. These requirements must be considered as mandatory! Institute for Information Systems – MSc BIS EMB – Operational E-Procurement 24.05.2023 47 Digital signature A digital signature assures – authenticity of the sender (identity is proven) – integrity of the sent document (content is unchanged) – non-repudiation of the sending (transfer has happened) Digital signature = electronic seal Institute for Information Systems – MSc BIS EMB – Operational E-Procurement 24.05.2023 48 Definitions Electronic invoice, e-invoice – Electronic transfer of invoice data, ideally in a structured form – Origin of data is proven  Done through the digital signature – Integrity of data is proven  Done through the digital signature – The digital signature creates an electronic invoice based on invoice data. Differences between B2B and B2C – B2B: E-invoicing (Exchange of electronic invoices between companies) – B2C: Electronic Bill Presentment & Payment (EBPP) or E-Billing (not valid for VAT pre-tax deduction) Institute for Information Systems – MSc BIS EMB – Operational E-Procurement 24.05.2023 49 Prerequisites for E-Invoicing Billers are capable of sending data in requested quality. Invoice recipient can read the data into his system. Fiscal authorities accept the proposed process. Market players accept the proposed process. – Deployment – Cost-to-benefit ratio Institute for Information Systems – MSc BIS EMB – Operational E-Procurement 24.05.2023 51 Success Factors for E-Invoicing Complete processes view (no invoice without an order!) Integration of all stakeholders Common understanding, use standards wherever possible Service providers with skills and reach Source: Tanner/Richter (2018, 109 ff.) – Customers – Interoperability with other service providers Suitable integration scenarios – Leveraging cost vs. benefit Strict execution Switzerland is well developed compared to European average Legal situation is favourable Institute for Information Systems – MSc BIS EMB – Operational E-Procurement 24.05.2023 54 Practice (Assignment) In your company (business model), you want to launch a desktop purchasing initiative. From the goods identified earlier (Kraljic matrix), pick those that are suitable for desktop purchasing (epurchasing). Which of these goods would you purchase … – On a buy-side solution with a multi-vendor catalogue? (Assume, you are a large company.) – Via a PunchOut integration? – On a sell-side solution? – On an electronic B2B marketplace? Give reasons and discuss your choices and criteria. Institute for Information Systems – MSc BIS EMB – Operational E-Procurement 24.05.2023 55 Comparison of B2C and B2B E-Commerce B2C E-Commerce Web site (company information) B2C ECommerce One-to-one marketing, CRM Institute for Information Systems – MSc BIS EMB – Operational E-Procurement Online product catalogue Online shop C2C/B2C marketplaces 24.05.2023 57 B2B E-Commerce is Wider B2B marketplaces PunchOut Multi supplier catalogue (buy-side) Customer portal Web site (company information) B2B ECommerce One-to-one marketing, CRM Institute for Information Systems – MSc BIS EMB – Operational E-Procurement Online product catalogue B2B online shop (sell-side) C2C/B2C marketplaces 24.05.2023 58 Literature Literature Jelassi, T.; Enders, A.; Martinez-López, F. J. (2014): Strategies for e-Business. Creating value through electronic and mobile commerce. 3rd ed. 2008. Prentice Hall. Kraljic, P. (1983): Purchasing must become supply management. Harvard Business Review, 61(5), 109–117. Leimstoll, U. (2004): Fallstudie Brütsch/Rüegger AG, in: Schubert, Petra; Wölfle, Ralf; Dettling Walter (Hrsg.): E-Business mit betriebswirtschaftlicher Standardsoftware: Einsatz von Business Software in der Praxis. S. 115-128, München, Wien: Hanser Verlag, 2004. Leimstoll, U., Dannecker, A., Knechtli, H., Quade, M., Tanner, C., & Wölfle, R. (2018). E-Business in the Era of Digital Transformation. In R. Dornberger (Hrsg.), Business Information Systems and Technology 4.0: New Trends in the Age of Digital Change (S. 81-101). Cham: Springer International Publishing. https://doi.org/10.1007/978-3-31974322-6_6 Schubert, P. (2003): E-Business-Integration, in: Schubert, Petra; Wölfle, Ralf; Dettling, Walter (Hrsg.): E-Business-Integration: Fallstudien zur Optimierung elektronischer Geschäftsprozesse. S. 1-21, München, Wien: Hanser Verlag, 2003. Tanner, Ch. (2009): Dauerhafter Erfolg im E-Procurement. München: Carl Hanser Verlag, 2009, 151 ff. Tanner, Ch. (2012): Supporting Global Procurement Transformation with Information Technology – Case Study Clariant: Electronic Purchase-to-Pay-Process for Indirect Spend. Basel: University of Applied Sciences Northwestern Switzerland, School of Business, 2012. Tanner, Ch.; Leimstoll, U. (2015): IT-Einsatz in der Beschaffung in Schweizer Grossunternehmen – Marktstudie 2015. Institut für Wirtschaftsinformatik, Hochschule für Wirtschaft, Fachhochschule Nordwestschweiz, Basel 2015. Tanner, Ch.; Richter, S.-L. (2018): Digitalizing B2B Business Processes – The Learnings from E-Invoicing. In R. Dornberger (Hrsg.), Business Information Systems and Technology 4.0: New Trends in the Age of Digital Change (S. 103-116). Cham: Springer International Publishing. https://doi.org/10.1007/978-3-319-74322-6_7 Tanner, Ch. et al., (2006): The role of information technology in procurement in the Top 200 companies in Switzerland. Basel: University of Applied Sciences Northwestern Switzerland, School of Business, 2006. Wölfle, R. (2006): Prozessexzellenz mit Business Software, in: Wölfle, R.; Schubert, P. (2006): Prozessexzellenz mit Business Software, Praxislösungen im Detail. München, Wien: Carl Hanser Verlag, 2006, 5 - 18. Institute for Information Systems – MSc BIS EMB – Operational E-Procurement 24.05.2023 62